The goblin under Google’s bed

In the space of a few weeks, Margrethe Vestager has transformed herself from a relatively obscure Danish politician into one of the world’s most consequential regulators — a stylish, irreverent 47-year-old mother of three who is suddenly a fearsome figure in corporate suites from Silicon Valley to Moscow and plenty of places in between.

Earlier this month the European commissioner for competition initiated a potentially titanic confrontation of public versus private power by taking aim at Google — the epitome of American cool-geek technological innovation and wealth. She launched a fight of a similar scale Wednesday when she announced she is going after Gazprom — the epitome of Russian bullyboy crony capitalism.

Suddenly, corporate captains multiple time zones from Vestager’s Brussels office need not only to pronounce her name — “Vest-ayer” — they need to take a crash course on Vestagerism. Who is this goblin under Google’s bed, and what are the ideas and philosophy of regulatory conflict that guide her?

Here is a primer on the picture that has emerged so far, based on watching her first six months as Europe’s competition referee and interviews with leaders in the growing legion of Brussels lobbyists and lawyers paid to reckon with her new approach.

Why is she doing this?

People viewing Vestager from afar who view her as a radical do not have it quite right. She’s made clear that she is fundamentally a figure who reveres process and wants to play by the rules — in public, in ways that don’t invite conspiracy theories or sow public suspicion that the European Union regulatory corridors are somehow not on the level.

Enough of the back-door settlements favored by her predecessor, Spaniard Joaquín Almunia. She wants to tell the companies what they have done wrong — and give them a chance to formally rebut those accusations. This, at least, is the view promoted by her allies. Another explanation — favored by analysts with a more cynical view of European Commission power — is that she has few arrows left in her quiver: the Commission has already tried and failed to settle both cases.

In many elite European circles, Google and Gazprom — two companies with histories and cultures that could not be more different — are united by a common trait: arrogance, and a ruthless determination to reap all the riches that can flow from their positions of market dominance. For someone like Vestager, who since her youth has been a believer in what people here call the European project (she first took a party post in Denmark at age 21), circumstances give her no choice but to make the point to these powerful global corporations: European regulators won’t be pushed around.

Why now?

In a break with the traditional quiet, grey styles of European regulators, Vestager is keenly attuned to public communication, and so far has proved good at it. She won high marks for a self-confident, occasionally humorous performance at her confirmation hearings. She is a hyper-kinetic presence on Twitter. And she is a deep believer in transparency.

That belief may have influenced the timing of the charges against Google. She traveled to Washington last week to speak at the American Bar Association annual antitrust conference. It seems likely she wanted to arrive in the US with a decision in hand to defend and explain. She could counter any suggestions that the Google investigation was anti-American and protectionist.

And if that were not enough, today she charged Gazprom, one of Russia’s flagship companies, with breaking EU antitrust laws. A “masterstroke” of timing, says Jacques Lafitte, founder of Avisa, a consultancy.

“For the Americans, who think that the only thing that drives the EU is anti-Americanism, she can say ‘I am going after Mr. Putin.’ And vice-versa to the Russians.”

But does Vestager really harbor anti-American feelings?

This is highly unlikely, however much young tech titans may be hurling darts at her picture in Silicon Valley. Despite its name, her Radical Left party in Denmark is liberal, which in the European sense means a believer in private enterprise that is free to reap big profits so long as it works in coordination with —and ultimately is accountable to — the public interest as defined by government officials. What’s more, Vestager is from the more conservative end of the party’s ideological spectrum, according to Margrete Auken, a Green member of the European Parliament.

As a matter of cultural orientation, Vestager has come off so far as a thoroughly cosmopolitan figure — hardly the kind of person to be motivated in some kind of fundamental way by anti-Americanism or anti-capitalism.

She’s almost the perfect picture of the modern “lean-in” feminist professional achiever. Under other circumstances, one could easily imagine Vestager sipping wine, trading stories of balancing career and child-raising, and becoming friends with people like Sheryl Sandberg of Facebook or Marissa Mayer at Yahoo at the Aspen Ideas Festival.

But that may have to wait for another time. The conflict with Google, as with Gazprom, may not be fundamentally about ideology, but it is fundamentally about power.

Her probe into Google’s search engine could prove extremely disruptive for the US company. (It could also be futile: by the time the Commission’s antitrust brawl with Microsoft finally ended, the software firm’s stranglehold over personal computers had been broken by Apple and the Internet.)

She is also running probes into the tax arrangements of US giants Apple, Amazon and Starbucks. Only Italy’s Fiat faces a similar investigation.

Her competition team is also holding up General Electric’s attempts to buy Alstom, the jewel of France’s industry — a year after the French government extracted better terms for its side.

The US government also has concerns about the Commission’s digital single market strategy, notably its pillar that internet platforms should be regulated.

On Gazprom, surely Vestager is worried about how the Russians will react?

Almunia certainly was. He had drawn up charges against Gazprom more than a year ago, but put them on ice. He reckoned that threatening huge fines against Gazprom at a time when relations between Russia and the European Union were fraying would only make things worse.

That may be true again, but Vestager — egged on by smaller member states like Lithuania — wants to go for it regardless.

Is Vestager really that different from Almunia?

On style and personality, very, very different.

Officials have welcomed Vestager’s strong and independent management style. Her cabinet is headed by two well-regarded female officials — and the trio of females stand out in the overwhelmingly male world of antitrust law. By contrast, Almunia’s team was reputedly more clubby and hierarchical.

At her confirmation hearings, she declined to participate in the usual ritual courtesy of praising the work of predecessor.

She seems to know, and enjoy, the fact that her gender and relative youth — as much as her powerful regulatory battles — give her something of a celebrity status. Asked at an event Tuesday, organized by Friends of Europe, a think-tank, how being a woman affected her role as a Commissioner, she said it was hard to tell but that it does enable “journalists to write longer articles as they can describe my dress too.”

She has personally met many complainants, some of whom had never met Almunia. There is also a generational shift, reflected in Vestager’s team but also in her savvy use of social media. That will prove useful for an antitrust commissioner whose mandate is likely to be dominated by competition problems involving the Internet.

However, Vestager on Tuesday was keen to point out, speaking at the same event, that she is no “expert in screen design or algorithms [or] I would not be here”. That, for followers of the case, was a pointed reference to her predecessor, who showed journalists PowerPoint presentations of the changes he wanted Google to make to its search results page.

Will Vestager fight the cases all the way?

“She is an iron lady but also very nice and gentle,” says Christel Schaldemose, a Danish socialist MEP. She has no doubt that Vestager has the mettle to see such vast and intense cases through to the end. But in her pronouncements so far on Google Vestager has been careful to keep her options open as regards what that end would be. She would be satisfied with a “principles-based” remedy, which sounds like a settlement, but she also recognises the importance of setting precedent for the market, which sounds like she is ready to fight the case all the way to the European Court of Justice’s grand chamber.

To some, Vestager’s move against Google last week was strong and decisive: by focusing her charges on Google Shopping, she has kept several concerns up her sleeve, which she can threaten to throw at the firm when the going gets tough. That could herald a decade of litigation.

To others, it was a sign of weakness: after six years of investigation, the Commission could only charge Google on the basis of a complaint against its shopping service first filed in 2009.

After charging Google and Gazprom can she go on holiday for 10 weeks?

That is how long the companies normally have to reply to the charges. But the answer is no.

Vestager confirmed Tuesday that she still expects to complete the tax investigations into Amazon, Apple, Starbucks and Fiat by the end of June. Those cases risk generating howls of anger not only from the corporations involved, but also from politicians who are loath to see the Commission tamper with national tax systems.

The Commission is also probing whether the contracts between US movie studios and European satellite broadcasters breach EU antitrust rules. A finding that they do would turn the entertainment industry on its head, and turn Europe’s creative sectors and their national governments – particularly France – against her.

Last, but not least, Vestager will have to decide whether to adhere to demands from the chief executives of Europe’s largest telecom companies to relax merger control rules in exchange for promises that they will invest in infrastructure — a priority for the new Commission.

The problem for Vestager is that many powerful politicians across Europe back their telecom companies, as do certain of her fellow Commissioners. Without their support, Vestager is powerless — as Almunia learned at the end of his mandate.

Related stories on these topics:

Soren Kirk

Pronunciation is not [Vest- aah] more like [Vest – ah – goh(r)] with a non-stressed but hearable ‘r’.
In danish it’s pronounced with three syllables not two. I believe you would say it with three syllables in english as well.

Posted on 4/22/15 | 2:25 PM CEST

Anders Oxby

Her name is pronounced with three syllables: Vest-ah-gor

Posted on 4/22/15 | 2:50 PM CEST

bob

Don’t you guys think that you should at least disclose the conflict of interest here since GOOG is one of your big sponsors? Because, you know… ethics and stuff.

Bas Bruurs

I don’t think you need to explain the term liberal to European readers.
Or are you explaining liberalism to Americans?

Posted on 4/23/15 | 4:08 AM CEST

NP

Did you just really compare a euro commissioner with a goblin?

But that aside. I was expecting an article about the issues Google faces, but instead get an article wondering where Vestager is anti-American… Which is not really A question on the mind of a European reader of a European news website.

I was hoping for quality euro news when I heard politico was starting in Europe, but this is just disappointing.

Posted on 4/23/15 | 8:51 AM CEST

LarryG

The article rambles… not very coherent… fails to really come to a substantiative point – but rather an assortment of random thoughts. Sorry.. but after reading the article – I still have no idea of the specific issues being addressed. It’s as if the article is really about ‘style”.

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[…] Margrethe Vestager, Europe’s competition boss, is in the final stretch of a nearly decade-long probe into how Google displays search results, with people inside and outside the Commission predicting a final verdict could come as soon as Tuesday. The company’s rivals say the case will attract a record fine of over €1.1 billion and set a precedent the world over. […]